SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_________________to__________________
COMMISSION FILE NUMBER 0-1287
STERLING SUGARS, INC.
____________________________________________________________________
Exact name of registrant as specified in its charter
Delaware 72-0327950
_______________________________ ______________________________
State or other jurisdiction of IRS employer identification
incorporation or organization number
P. O. Box 572, Franklin, La. 70538
____________________________________________________________________
Address of principal executive offices Zip Code
Registrant's telephone number including area code 318 828 0620
Not Applicable
____________________________________________________________________
Former name, former address and former fiscal year, if changed since
last report.
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirments for the past 90 days.
YES X NO
There were 2,500,000 common shares outstanding at May 30, 1997.
Total number of pages 13
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STERLING SUGARS, INC.
I N D E X
PAGE
NUMBER
PART I: FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Condensed balance sheets April 30, 1997
(unaudited) and January 31, 1997 I-1
Statements of earnings and retained earnings
Three months ended April 30, 1997 and 1996
(unaudited) I-2
Statements of cash flows
Three months ended April 30, 1997 and 1996 I-3
(unaudited)
Notes to condensed financial statements
Three months ended April 30, 1997 and 1996 I-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS I-7
PART II. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K II-1
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STERLING SUGARS, INC.
CONDENSED BALANCE SHEETS
April 30, January 31,
1997 1997
UNAUDITED NOTE
ASSETS: ---------------------------
CURRENT ASSETS:
Cash and short-term investments $ 10,154 $ 110,332
Accounts receivable 3,624,988 1,890,398
Inventories 2,739,520 11,667,948
Expenditures for future crops (Note B) 1,628,418 148,334
Deferred income taxes 102,200 102,200
Other current assets 449,421 557,298
------------- -------------
TOTAL CURRENT ASSETS $ 8,554,701 $ 14,476,510
------------- -------------
Property, plant and equipment - net $ 20,034,443 $ 18,970,789
------------- -------------
Expenditures for future crops $ 1,389,338 $ 1,389,338
------------- -------------
Notes receivable - net of allowance $ 728,804 $ 684,529
------------- -------------
Deferred loan acquisition costs $ 60,372 $ 63,463
------------- -------------
$ 30,767,658 $ 35,584,629
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 4,108,647 $ 6,728,264
Short-term debt - 2,575,000
------------- -------------
TOTAL CURRENT LIABILITIES $ 4,108,647 $ 9,303,264
------------- -------------
Long-term debt $ 9,660,743 $ 9,615,175
------------- -------------
Deferred income taxes $ 1,000,700 $ 1,000,700
------------- -------------
STOCKHOLDERS' EQUITY:
Common stock $ 2,500,000 $ 2,500,000
Additional paid in capital (Note C) 40,455 40,455
Retained earnings 13,457,113 13,125,035
------------- -------------
$ 15,997,568 $ 15,665,490
------------- -------------
$ 30,767,658 $ 35,584,629
============= =============
NOTE: The balance sheet at January 31, 1997 has been taken from the
audited financial statements at that date, and condensed.
See notes to condensed financial statements
I-1 -3-
STERLING SUGARS, INC.
STATEMENT OF EARNINGS AND RETAINED EARNINGS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
---------------------------
1997 1996
---- ----
REVENUES:
Sugar and molasses sales $10,103,402 $11,237,659
Interest earned 1,181 8,324
Mineral leases and royalties 65,724 22,098
Gain on sale of depreciable assets (45,005) -
Other 41,046 14,988
------------ ------------
$10,166,348 $11,283,069
------------ ------------
COSTS AND EXPENSES:
Cost of products sold $ 9,205,641 $ 9,749,975
General and administrative 179,336 156,362
Interest expense 245,761 106,293
------------ ------------
$ 9,630,738 $10,012,630
------------ ------------
NET EARNINGS BEFORE INCOME TAXES $ 535,610 $ 1,270,439
INCOME TAXES 203,532 482,767
------------ ------------
NET EARNINGS $ 332,078 $ 787,672
RETAINED EARNINGS AT BEGINNING OF PERIOD 13,125,035 11,088,065
------------ ------------
RETAINED EARNINGS AT END OF PERIOD $13,457,113 $11,875,737
============ ============
NET EARNINGS PER SHARE $ .13 $ .32
============ ============
See notes to condensed financial statements
I-2 -4-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED APRIL 30
---------------------------
1997 1996
---- ----
OPERATING ACTIVITIES:
Net earnings $ 332,078 $ 787,672
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Amoritization of loan costs 3,091 2,954
Depreciation 450,000 380,523
Loss on sale of depreciable assets 45,005 -
Changes in operating assets and liabilities:
Increase in accounts receivable (1,734,590) ( 21,131)
Increase in notes receivable ( 44,275) ( 64,052)
Decrease in inventories 8,928,428 9,525,003
Decrease (Increase) in current assets 107,877 ( 198,200)
Increase in expenditures for future crops (1,480,084) (1,163,752)
Decrease in accounts payable and accrued exp. (2,619,617) (1,773,566)
Other items - net ( 128,199) ( 133,231)
------------ ------------
Net cash provided by operating activities $ 3,859,714 $ 7,342,220
------------ ------------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $(1,662,987) $( 588,217)
Proceeds from sale of depreciable assets 104,328 -
----------- ------------
Net cash used in investing activities $(1,558,659) $( 588,217)
------------ ------------
FINANCING ACTIVITIES:
Proceeds from short-term debt $ 2,765,000 $ 855,000
Proceeds from long-term debt 217,343 (4,513,334)
Payments on short-term debt (5,340,000) ( 43,576)
Payments on long-term debt ( 43,576) -
------------ ------------
Net cash used in financing activities $(2,401,233) $(3,701,910)
------------ ------------
(Decrease) Increase in cash and temporary
investments $( 100,178) $ 3,052,093
Cash and temporary investments at the
beginning of the period 110,332 134,052
------------ ------------
Cash and temporary investments at the
end of the period $ 10,154 $ 3,186,145
============ ============
Continued
See notes to condensed financial statements
I-3 -5-
STERLING SUGARS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Supplemental information:
Interest paid $ 207,350 $ 37,151
=========== ===========
Income taxes paid - $ 103,500
=========== ===========
I-4 -6-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(UNAUDITED) (CONTINUED)
A. CONDENSED FINANCIAL STATEMENTS:
The condensed balance sheets as of April 30, 1997, the
statements of earnings and retained earnings for the three
months ending April 30, 1997 and 1996, and the condensed
statements of cash flows for the three month period then
ended have been prepared by the Company, without audit. In
the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present
fairly the financial position, results of operations and
cash flows at April 30, 1997 and for all periods presented
have been made.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed financial
statements be read in conjunction with the 1997 annual report
to stockholders. The results of operations for the period
ending April 30, 1997 are not necessarily indicative of the
operating results expected for the full year.
I-5 -7-
STERLING SUGARS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED APRIL 30, 1997 AND 1996
(UNAUDITED)
B. EXPENDITURES FOR FUTURE CROPS:
Expenditures incurred and income earned from sugar
operations for the 1997 and 1996 crops have been deferred
in order to properly match revenues and expenses. The
deferred items are as follows:
THREE MONTHS ENDED APRIL 30
---------------------------
1997 1996
---- ----
DEFERRED COSTS: (1997 AND 1996 CROPS)
Factory $ 1,370,108 $ 1,037,521
Plantations 257,158 330,629
------------ ------------
$ 1,627,266 $ 1,368,150
Land preparation and planting costs
1998 and 1997 crops respectively 1,152 12,569
------------ ------------
$ 1,628,418 $ 1,380,719
============ ============
C. ADDITIONAL PAID IN CAPITAL:
As discussed in Form 10-K, filed for the year ended January 31,
1996, the Company entered into a technical service agreement with
M. A. Patout & Son, Ltd. (Patout). The agreement provided an
option for Patout to purchase 50,000 shares of the Company's
treasury stock at a price of $3.25 per share. In April, 1995
Patout exercised its option.
I-6 -8-
STERLING SUGARS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
Sugar and Molasses Sales:
Sugar and molasses sales for the three months ended April 30, 1997
and 1996 were as follows:
1997 1996
------ ------
Raw sugar sales $ 9,896,017 $10,947,640
Molasses sales 207,385 290,019
------------ ------------
$10,103,402 $11,237,659
============ ============
For the first quarter of the Company's fiscal year ending January
31, 1998 (fiscal 1998), sales of raw sugar (1996 crop) decreased com-
pared to the same quarter ending in fiscal 1997 (1995 crop). This de-
crease is the result of the Company having marketed less sugar during
the current quarter. At January 31, 1997, the Company had on hand
approximately 26,812 tons of raw sugar available for sale to refiners
as compared to 31,545 tons of raw sugar at January 31, 1996. As of
April 30, 1997, the Company had sold and shipped 22,513 tons of raw
sugar and had on hand 4,299 tons. For the quarter ending April 30,
1996, the Company had sold and shipped 24,624 tons of raw sugar and had
on hand approximately 6,921 tons held in inventory. The remaining 4,299
tons of raw sugar from the 1996 crop is expected to be sold and shipped
by June, 1997. The sugar price for the 1996 crop decreased and is
estimated at $22.19 cwt. For the 1995 crop, the average price was
$22.52 cwt.
As of January 31, 1997, the Company had on hand approximately
767,096 gallons of molasses all of which had been sold as of April 30,
1997. At January 31, 1996, the Company had approximately 714,343
gallons of molasses on hand all of which had been sold as of April 30,
1996. Although slightly more molasses was sold in the 1997 period, the
price per gallon decreased for the 1996 molasses crop. The Company
received $.40 per gallon from the sale of the 1995 molasses crop compared
to $.32 per gallon for the sale of the 1996 molasses crop.
Interest Earned:
Interest earned for the quarter ended April 30, 1996 was $8,324
compared to $1,181 for the same quarter ended April 30, 1997. The
decrease for the current period is primarily attributable to the
decrease in short-term investments. At January 31, 1997, the Company had
cash and short-term investments of $10,154 compared to $3,186,145 at
January 31, 1996.
Mineral Leases and Royalties:
For the quarter ended April 30, 1997, income from mineral leases
and royalties increased to $65,724 compared to $22,098 for the period
I-7 -9-
ending in 1996. The increase is attributable to the Company entering
into two seismic agreements in the first quarter of fiscal 1998. One
agreement is for six months, covers approximately 710 acres in St. Mary
Parish for $31,625. The second agreement contains an eighteen month
term, covers 2,396 acres in St. Mary Parish for $71,891. This agreement
contains an option agreement to lease the subject property to acquire an
oil and gas lease. Royalty income remained consistent for the first
quarters of 1997 and 1996.
Loss on the Sale of Depreciable Assets:
The Company recognized a loss on the sale of obsolete machinery and
equipment for the three month period ending April 30, 1997 of $45,005.
For the same period ending in 1996, the Company had no gains or losses
from the sale of depreciable assets.
Other Revenues:
Other revenues, which consist mainly of miscellaneous income items,
were $41,046 for the three month period ending April 30, 1997 and
$14,988 for the same period ending in 1996. These revenues, which can
vary considerably from year to year, generally include amounts received
for the sale of scrap and other miscellaneous items.
Cost of Products Sold:
Cost of products sold for the three month periods ended April 30,
1997 and 1996 were $9,205,641 and $9,749,975, respectively. Costs
relating to sales are charged to cost of products sold. Accordingly,
costs have decreased for 1997 as would be expected with the decrease
in sales.
General and Administrative Expenses:
General and administrative expenses for the three months ended
April 30, 1997 were $179,336 compared to $156,362 for the same period
in 1996. The increase in these expenses during the current period is
primarily the result of increases in miscellaneous expense items.
Interest Expense:
Interest expense increased to $245,761 for the period ending
April 30, 1997 from $106,293 for the same period ending in 1996.
The increase in interest expense is primarily the result of interest
expense incurred on long-term debt of $6,500,000. The Company, in
December, 1996, made a long-term loan to finance the purchase of approx-
imately 8,519 acres of land in St. Mary Parish of which 4,863 acres is
cultivable cane land. The acquisition is viewed as good for the Company
in that it will secure and maintain the Company's current cane supply.
The loan agreement contains a ten year payout with all annual cane land
rental income derived from the land applied to the loan. Interest
incurred is paid quarterly.
Income Taxes:
The income taxes for the three month period ending April 30,
1997 and 1996 were recorded at the statutory rate of 38 percent which
reflects the 34 percent federal corporate rate plus 4 percent state
income taxes.
I-8 -10-
Liquidity and Capital Resources:
At April 30, 1997, the Company had working capital of $4,446,054
compared to $5,173,246 at January 31, 1997. The working capital ratios
were 2.1 to 1 and 1.6 to 1, respectively.
For the coming year, with a good growing season, it is quite possible
the Company's volume of cane to grind will increase. Along with this
increase is a trend among sugarcane farmers in Louisiana, including our
area, to convert harvesting practices from whole stalk to billet combines.
Most factory managers would agree the combine system at this time is more
favorable to farmers than factories. Despite this fact, it is important
the Company accomodate its' farmers and as a result, the Company has
budgeted $750,000 in capital additions for handling billet cane on the
cane yard. The Company has also budgeted $2,700,000 in other capital
additions which include improvements to steam boiler No. 5, various im-
provements to steam boilers Nos. 1, 2, 4 and 6, installation of two 1,500
KW generators, a cane wash table and installation of one vacuum pan for
the raw house. The improvements for the coming year other than the billet
cane handling improvements, will aid the Company in becoming more
efficient in operating the factory. The additions for handling billet
cane is expected to increase the factory cost of cane yard operations.
As in the past, the Company expects to fund the cost of the capital
additions from working capital and short-term borrowings through lines
of credit available to the Company.
Expenditures for Future Crops - Note B:
Factory Deferred Costs:
Factory deferred costs for the three month period ended April 30,
1997 were $1,370,108. Such costs for the same period in 1996 were
$1,037,521. The increase for the current quarter is primarily
attributable to an increase in expenses incurred for idle season
maintenance and repairs compared to the same quarter ending April 30,
1996. The Company for the 1997 idle season has budgeted $2,250,210
for idle season repair and maintenance. For the 1996 idle season the
Company had budgeted $2,161,000 for idle season repairs and maintenance.
Plantation Deferred Costs:
Plantation deferred costs decreased to $257,158 for the three
month period ending April 30, 1997 from $330,629 for the same period
in 1996. The decrease in plantation deferred costs is primarily
attributable to the Company in February 1997 leasing to an independent
farmer approximately 383 acres of its' agricultural division. The
Company's farm division now consist of 1,584 acres.
I-9 -11-
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K
(a) Exhibits - None
(b) Reports on Form 8K
No reports on Form 8K have been filed during the
quarter for which this report is filed.
II-1 -12-
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
STERLING SUGARS, INC.
---------------------
(REGISTRANT)
DATE June 13, 1997 By /S/ Craig P. Caillier
--------------------------- ---------------------
CRAIG P. CAILLIER
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
DATE June 13, 1997 By /S/ Stanley H. Pipes
---------------------------- ---------------------
STANLEY H. PIPES
VICE PRESIDENT AND TREASURER
II-2 -13-